Tue Jan 13, 2015 9:33pm EST
(Recasts with junior creditors seeking to put hold on expected bankruptcy filing)
By Tom Hals
Jan 13 (Reuters) - Junior creditors of Caesars Entertainment Corp moved on Tuesday to put on hold the expected bankruptcy of the casino company's operating unit, which has said it could file for Chapter 11 as soon as Thursday.
On Monday, junior noteholders filed an involuntary bankruptcy against the operating unit in the U.S. Bankruptcy Court in Wilmington, Delaware. The next day they asked the judge assigned to the involuntary case to stay any voluntary bankruptcy until the Delaware bankruptcy judge can rule on the proper court to hear the case.
Caesars and its creditors are jostling for leverage as the largest U.S. casino company seeks to build support for its complex plan to cut the operating unit's debt to $8.6 billion from $18.4 billion.
Earlier on Tuesday, a Caesars attorney told a Delaware state court judge the company will seek to extend to itself the legal shield of bankruptcy protection once its operating unit files for Chapter 11.
A lawyer for the junior creditors said the plan - which would halt their litigation over the proposed restructuring - was "extraordinary", because the parent company will ask for the benefits of bankruptcy without actually filing for Chapter 11.
Its restructuring plan has the support of senior noteholders but other creditors have been trying to block the overhaul, including junior noteholders who sued the casino company and various subsidiaries in a Delaware court in August.
Eric Seiler, an attorney for Caesars, told a court hearing that once a voluntary bankruptcy has been filed, the company will ask the judge to put on hold the Delaware lawsuit against all the Caesars units, not just the bankrupt subsidiary.
Caesars has asked the Delaware court to dismiss the case, although Caesars is facing a similar lawsuit in New York as well.
An attorney for the junior noteholders, Bruce Bennett of Jones Day, called extending the so-called automatic stay of bankruptcy to the parent "extraordinary relief for a third party that is not in bankruptcy."
Bennett said he expected the lawsuit could continue against the non-bankrupt parent and subsidiaries after the operating unit files for Chapter 11.
The lawsuit that the Delaware court has been asked to dismiss alleges the operating company, which issued $4.5 billion in junior notes, was plundered by shareholders of the parent company and moved beyond the reach of creditors.
Caesars has said the various asset transfers moved capital-intensive projects out of the operating unit to free up cash. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Grant McCool and Ken Wills)
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